Realtor or No Realtor?

Question

Just qualified for a conventional mortgage loan and plan on using it for an investment property. I have no intentions on using the entire amount I qualify for so I've been looking at foreclosure listings online which fall well below my price range. Nice, right? Well, the realtors I've been working with have sent me no foreclosures as purchase options, but I find many myself online. I have no experience with foreclosures but I think serious consideration should be given to the foreclosure market as it seems to make good financial sense. My question is, should I inform the realtor about the properties or should I try to pursue the property on my own. If I go at it alone, if possible, how would I find any potential liens or other expenses attached to the property not listed on the site. And what unexpected expenses should I even look for?

Matthew Olszak · Answer

@Harold Henderson Absolutely tell them about properties you find. It helps me at least to better understand my client's needs/wants. It could also be that you are working with the wrong person who doesn't see the potential in foreclosures or doesn't know how to work the buy side of an REO and get deals closed so they write off foreclosures as too time consuming. Or, maybe the bulk of the properties you are looking at are cash only - at least if you send them over it'll open the conversation as to why these haven't been presented to you.Account Closed True, we don't run a full title search, but I at least pull up the property in Realist to check for anything wild going on that was recorded, and in Chicago check for violations and 311 complaints. Its of no benefit to me to seal a deal and then a month later at the closing table have everything fall apart because of an exception on the title report...I'd rather catch those issues before spending the time showing a property.

Peter Mckernan · Answer

@Harold Henderson As far as a realtor or not, that is up to you. They can help with the title search the most, since they have access to title reps that can give you that information mostly for free if they have a good relationship with the title rep.As for buying a foreclosure purchase with a conventional loan that may give you some problems. The reason is that if you purchase a foreclosure, chances are the property maybe in a condition that the lender may not lend the money on. Those homes are typically “as is” properties and if there are not certain things (running ac/heat, flooring, or a solid roof), you may find the lender unwilling to lend.If this is the case you can always go to a hard money loan and not worry about the condition since that type of lender will be looking at the investment, and they’ll calculate the return on the product.

Jay Hinrichs · Answer

@Matthew Olszak when I used to work retail real estate IE sell others properties... my SOP was the day I got the listing I opened escrow with buyer to follow.. then title company did a prelim on the property for me... so within 2 to 3 days I had a fresh prelim on my listing.as you state nothing worse then something coming up after all the work you put in to close a deal.. seems to be bassakwards the way most people go about it.. I know you have one hand tied behind you back in the weird way transactions are done in IL.. IE an attorney has to order title.. but I would sit with your closer and get this done on any listing.

Natalie Schanne · Answer

Harold Henderson - Have you communicated with your agent what you want? In my RE database, I can choose REO and short sales and add them to a buyer's property email. Sometimes I'll create multiple auto-emails like Multi-Family, new REOs, new Short Sales, so the investor can look at different categories. In my market which is pretty hot, I think investors MAY get a better shot at closing if they work directly with the listing agent on each property they think they want. However, you're giving up getting good advice from a buy side RE agent who should work on your behalf to negotiate the price lower or higher seller concessions if there are issues with the property. Once you sign something with any agent that's an exclusive buyer's agency contract, usually you're locked in for a time period to that realtor. Try not to sign these if you are not certain your agent creates value. Your agent should do much more than just submit your offer (whatever number you propose). He/she should run comps to ensure you're getting a fair price, suggest contractors to help you fix it up, etc.

Account Closed · Answer

A realtor isn't going to do a title search.

Robert Adams · Answer

@Harold HendersonI am not familiar with the Illinois market but here in Vegas the below applies.In regard to homes listed on the MLS, less than 3% are foreclosures. Many 3rd party sites will show foreclosures that not actually available.If all you want to go after is foreclosures have your agent set you up with a direct feed from the MLS and you will receive an email with the foreclosure listings as they become available. With the current inventory shortage in Vegas you will want to make an aggressive offer quickly before other buyers come to the table unless of course there is an auction time frame, then we usually wait right before the offers will be reviewed at which time we submit it last minute before it expires.In most cases you can get a prelim during your due diligence period to review any liens etc. In most cases they will be paid off prior to close and you will receive a free and clear title that is insurable. Some all cash auctions will require you do to your homework before the purchase but based on your post this wouldn't apply because you are getting a loan.

Alex Bok · Answer

Look on county assessor websites. This is the easiest way to find information on the property. Other wise work with an attorney for title information

Crystal Smith · Answer

Inform the realtors about the properties & pursue on your own. Why go it alone? Your realtor should be able to restrict the search to foreclosures if that's what you want. Almost every foreclosure is listed on the MLS so it will save you some time having those listings automatically come to you. Regarding liens- Most, not all, bank foreclosures close w/ warranty deeds, which will protect you. Your realtor can check a system called Realist to see if anything besides the foreclosure shows up but Realist won't include things like mechanics liens. Since most foreclosures are sold "AS IS" you're unexpected expenses are whatever is required to repair the building. You won't know what that is until you visit the property. If you're purchasing a property in the city of Chicago you should also check the Chicago Building Violation website. If the property has any violations it will be listed on the site. When we purchase outside Chicago city property we usually call the local Building Code department to see if there are any existing violations.

Jim Blackburn · Answer

Harold Henderson Lender will do title search for you, and if you are made aware of any lien issues before your contingency date that the seller will not satisfy, and you decide to back out of contract, then you won't end up paying for the title work.

Jim Blackburn · Answer

Harold Henderson 424,100 max loan amount, 15% minimum down w/ conventional Up to 703,000 max loan amount for 4 units and just 3.5 % down if you will occupy one of the units w/ FHA.